SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the Fiscal Year Ended December 31, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
------------ ------------
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COMMISSION FILE NUMBER 1-7534
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A. Full title of the plan and the address of the plan, if different from that
of the issuer named below:
NETWORK SYSTEMS CORPORATION SAVINGS
AND STOCK OWNERSHIP PLAN
B. Name of issuer of the securities held pursuant to the plan and the address
of its principal executive offices:
STORAGE TECHNOLOGY CORPORATION
2270 South 88th Street
Louisville, Colorado 80028-4309
<PAGE>
<PAGE>
NETWORK SYSTEMS CORPORATION
SAVINGS AND STOCK OWNERSHIP PLAN
FINANCIAL STATEMENTS
AND ADDITIONAL INFORMATION
DECEMBER 31, 1996 AND 1995
<PAGE>
<PAGE>
NETWORK SYSTEMS CORPORATION
SAVINGS AND STOCK OWNERSHIP PLAN
FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
TABLE OF CONTENTS
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Page
Financial Statements:
Report of Independent Accountants 1
Statement of Net Assets Available for Benefits,
with Fund Information 2 - 3
Statement of Changes in Net Assets Available for
Benefits, with Fund Information 4 - 5
Notes to Financial Statements 6 - 13
Additional Information:*
Schedule I - Item 27a Form 5500 - Schedule of
Assets Held for Investment Purposes 14
Schedule II - Item 27b Form 5500 - Schedule of
Loans or Fixed Income Obligations in Default 15 - 16
Schedule III - Item 27d Form 5500 - Schedule of
Reportable Transactions 17
* Other schedules required by Section 2520.103-10 of the Department of Labor
Rules and Regulations for Reporting and Disclosure under ERISA have not been
presented because they are not applicable.
<PAGE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Participants and Administrator of
the Network Systems Corporation
Savings and Stock Ownership Plan
In our opinion, the accompanying statements of net assets available for
benefits, with fund information, and the related statements of changes in net
assets available for benefits, with fund information, present fairly, in all
material respects, the net assets available for benefits of the Network
Systems Corporation Savings and Stock Ownership Plan (the Plan) at December
31, 1996 and 1995 and the changes in net assets available for benefits for
the years then ended, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Plan's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements
in accordance with generally accepted auditing standards which require that
we plan and perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
As discussed in Note 1 to the financial statements, the Board of Directors of
Network Systems Corporation, the Plan's sponsor, approved the termination of
the Plan effective December 31, 1995. In accordance with generally accepted
accounting principles, the Plan used the liquidation basis of accounting in
presenting the 1996 and 1995 financial statements.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The additional information included
in Schedules I, II and III is presented for purposes of additional analysis
and is not a required part of the basic financial statements but is
additional information required by ERISA. The fund information in the
statement of net assets available for benefits and the statement of changes
in net assets available for benefits is presented for purposes of additional
analysis rather than to present the net assets available for plan benefits
and changes in net assets available for benefits of each fund. The
supplemental schedules and fund information have been subjected to the
auditing procedures applied in the audits of the basic financial statements
and, in our opinion, are fairly stated in all material respects in relation
to the basic financial statements taken as a whole.
Price Waterhouse LLP
Denver, Colorado
June 20, 1997
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NETWORK SYSTEMS CORPORATION
SAVINGS AND STOCK OWNERSHIP PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION
DECEMBER 31, 1996
<TABLE>
<CAPTION>
Fund Information
-------------------------------------------------------------------------------------------
Network IAI
Systems Blended Fidelity Regional
Stock Fund Rate Fund Fund Fund Loan Fund Total
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Receivables:
Employees' loan repayments $ 12,548 $ 9,558 $ 2,533 $ (24,596) $ 43
Accrued interest $ 43 15,202 6 8 56 15,315
---------- ---------- ---------- ---------- ---------- ----------
Total receivables 43 27,750 9,564 2,541 (24,540) 15,358
Due from (to) other funds 5,295 3,460 (3,737) (5,018) 0
Investments (Note 3) 999,809 9,233,137 13,881,841 4,776,727 738,551 29,630,065
---------- ---------- ---------- ---------- ---------- ----------
Net assets available for plan
benefits $ 1,005,147 $ 9,264,347 $13,887,668 $ 4,774,250 $ 714,011 $29,645,423
========== ========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an
integral part of these financial statements.
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<PAGE>
<PAGE>
NETWORK SYSTEMS CORPORATION
SAVINGS AND STOCK OWNERSHIP PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Fund Information
-------------------------------------------------------------------------------------------
Network IAI
Systems Blended Fidelity Regional
Stock Fund Rate Fund Fund Fund Loan Fund Total
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Receivables:
Employer's contributions $ 239,710 $ 258,969 $ 88,985 $ 587,664
Employees' contributions 23,073 16,832 2,364 42,269
Employees' loan repayments 43,012 37,098 9,623 $ (57,968) 31,765
Accrued interest $ 95 162,850 107 39 158 163,249
---------- ---------- ---------- ---------- ---------- ----------
Total receivables 95 468,645 313,006 101,011 (57,810) 824,947
Investments (Note 3) 764,439 14,553,511 10,337,329 3,938,171 800,628 30,394,078
---------- ---------- ---------- ---------- ---------- ----------
Net assets available for plan
benefits $ 764,534 $15,022,156 $10,650,335 $ 4,039,182 $ 742,818 $31,219,025
========== ========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an
integral part of these financial statements.
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<PAGE>
<PAGE>
NETWORK SYSTEMS CORPORATION
SAVINGS AND STOCK OWNERSHIP PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS, WITH FUND
INFORMATION
DECEMBER 31, 1996
<TABLE>
<CAPTION>
Fund Information
-------------------------------------------------------------------------------------
First Trust
-------------------------------------------------------------------------------------
Network IAI
Systems Blended Fidelity Regional
Stock Fund Rate Fund Fund Fund Loan Fund Total
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Net realized and unrealized appreciation
(depreciation) in fair value of
investments $ 576,871 $ 343,226 $ 1,133,953 $ (92,506) $ 1,961,544
Interest and dividend income 1,309 348,869 1,165,576 732,337 2,248,091
Loan repayment interest 25,619 20,818 7,374 $ 872 54,683
---------- ---------- ---------- ---------- ---------- ----------
578,180 717,714 2,320,347 647,205 872 4,264,318
Contributions (Refunds):
By participants (5,278) (2,392) 3,437 (4,233)
---------- ---------- ---------- ---------- ---------- ----------
(5,278) (2,392) 3,437 (4,233)
Withdrawals by participants (66,614) (2,942,684) (2,056,186) (713,849) (54,354) (5,833,687)
Transfers:
Between funds (270,953) (3,495,207) 2,982,381 783,779 0
New loans (170,356) (108,308) (24,036) 302,700 0
Loan principal repayments 138,002 101,491 38,532 (278,025) 0
---------- ---------- ---------- ---------- ---------- ----------
(270,953) (3,527,561) 2,975,564 798,275 24,675 0
Net increases (decreases) 240,613 (5,757,809) 3,237,333 735,068 (28,807) (1,573,602)
Net assets at beginning of year 764,534 15,022,156 10,650,335 4,039,182 742,818 31,219,025
---------- ---------- ---------- ---------- ---------- ----------
Net assets at end of year $ 1,005,147 $ 9,264,347 $13,887,668 $ 4,774,250 $ 714,011 $29,645,423
========== ========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE>
<PAGE>
NETWORK SYSTEMS CORPORATION
SAVINGS AND STOCK OWNERSHIP PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE
FOR BENEFITS, WITH FUND INFORMATION
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Fund Information
------------------------------------------------------------------------------------------------------
Fidelity Management
First Trust Trust Company
---------------------------------------------------------------------- ---------------------------
Network IAI
Systems Blended Fidelity Regional Magellan Growth and
Stock Fund Rate Fund Fund Fund Loan Fund Fund Income Fund
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Net realized and
unrealized appreciation
(depreciation) in fair
value of investments $ (95,561) $ 322,382 $ 1,622,208 $ 538,134 $ 200,054 $ 99,928
Interest and dividend
income 8,193 700,341 768,363 437,021 $ 458 1,778 3,696
Loan repayment interest 20,266 14,914 5,711
---------- ---------- ---------- ---------- ---------- ---------- ----------
(87,368) 1,042,989 2,405,485 980,866 458 201,832 103,624
Contributions:
By employer 239,710 258,969 88,985
By participants 1,417,788 1,613,978 550,932
---------- ---------- ---------- ---------- ---------- ---------- ----------
1,657,498 1,872,947 639,917
Withdrawals by
participants (103,575) (2,862,267) (861,329) (343,569) (59,497) (739,016) (520,218)
Transfers:
Between funds (130,197) 746,905 547,406 (240,558) 86,721 (369,629) (276,477)
New loans (178,909) (95,516) (56,510) 330,935
Loan principal repayments 194,745 96,174 33,248 (324,167)
---------- ---------- ---------- ---------- ---------- ---------- ----------
(130,197) 762,741 548,064 (263,820) 93,489 (369,629) (276,477)
Net increases (decreases) (321,140) 600,961 3,965,167 1,013,394 34,450 (906,813) (693,071)
Net assets at beginning
of year 1,085,674 14,421,195 6,685,168 3,025,788 708,368 906,813 693,071
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net assets at end of
year $ 764,534 $15,022,156 $10,650,335 $ 4,039,182 $ 742,818 $ 0 $ 0
========== ========== ========== ========== ========== ========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Fund Information
---------------------------------------------------------
Fidelity Management Trust Company
---------------------------------------------------------
Retirement
Intermediate Money Market Asset Manager
Bond Fund Fund Fund Loan Fund Total
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Investment income:
Net realized and
unrealized appreciation
(depreciation) in fair
value of investments $ 5,919 $ 1,021 $ 2,694,085
Interest and dividend
income 4,373 $ 12,681 163 1,937,067
Loan repayment interest 40,891
---------- ---------- ---------- ---------- ----------
10,292 12,681 1,184 4,672,043
Contributions:
By employer 587,664
By participants 3,582,698
---------- ---------- ---------- ---------- ----------
4,170,362
Withdrawals by
participants (89,530) (278,854) (656) (5,858,511)
Transfers:
Between funds (59,812) (202,354) (14,701) $ (87,304) 0
New loans 0
Loan principal repayments 0
---------- ---------- ---------- ---------- ----------
(59,812) (202,354) (14,701) (87,304) 0
Net increases (decreases) (139,050) (468,527) (14,173) (87,304) 2,983,894
Net assets at beginning
of year 139,050 468,527 14,173 87,304 28,235,131
---------- ---------- ---------- ---------- ----------
Net assets at end of
year $ 0 $ 0 $ 0 $ 0 $31,219,025
========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE>
<PAGE>
NETWORK SYSTEMS CORPORATION
SAVINGS AND STOCK OWNERSHIP PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 1 - DESCRIPTION OF PLAN
- ----------------------------
General
- -------
The Network Systems Corporation Savings and Stock Ownership Plan (the Plan)
is a defined contribution plan to which, prior to 1996, eligible employees of
Network Systems Corporation (the Company or NSC) could elect to contribute
stated percentages of their compensation. Participation by eligible
employees was voluntary. The following is not a comprehensive description of
the Plan and, therefore, does not include all situations and limitations
covered by the Plan. Participants should refer to the Plan agreement for
more complete information.
On March 7, 1995, NSC was acquired by Storage Technology Corporation
(StorageTek). Effective December 1995, the Plan is administered by
StorageTek's Profit-Sharing Committee which consists of at least three
persons who are appointed by the Board of Directors of StorageTek.
Plan Termination
- ----------------
In connection with the Company's merger with StorageTek, the Board of
Directors of NSC approved the termination of the Plan effective December 31,
1995. Pursuant to the terms of the Plan, all participants as of December 31,
1995, were fully vested in their account balances. Pending approval of the
Internal Revenue Service, all remaining plan assets will be transferred into
StorageTek's Employees' Profit Sharing and Thrift Plan. This transfer is
expected to be completed during 1997.
Contributions
- -------------
In connection with the merger and termination of the Plan in 1995, no
employee or Company matching contributions were made in 1996.
During 1995, employees could have their annual compensation reduced by 1% to
15%, not to exceed limitations under applicable IRS regulations, through
automatic payroll deductions (pretax savings contribution) and contributed to
the Plan. Employees could also make contributions through automatic payroll
deductions on an after-tax basis of from 1% to 8% of compensation. These
after-tax savings contributions did not reduce the employee's income for
federal or state income tax purposes. The Company could make a matching
contribution to the Plan as a percentage of the first 6% of the employee's
pretax savings contributions. For the 1995 Plan year, the Company made
matching contributions amounting to $587,664 based on matching percentages of
30% of the first 6%.
All contributions are held in trust and invested by the Plan's trustee, First
Trust Institutional Trust Group. Contributions were initially deposited by
the trustee in either the First American Prime Obligations Fund or a short-
term U.S. government fund. Contributions were later reallocated in
accordance with the options selected by the participant or the requirements
of
-6-
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<PAGE>
promissory note agreements. Any Company contributions on behalf of a
participant were invested by the trustees in the same fund or funds specified
by the participant, in direct proportion to the allocation of that
individual's payroll deduction contributions.
Investment Fund Options
- -----------------------
The Plan offers the following investment options:
. In connection with the Company's merger with StorageTek, each outstanding
share of NSC common stock was converted into .2618 shares of StorageTek
common stock. As a result of the merger, shares of NSC stock held by the
Network Systems Stock Fund were converted into StorageTek common stock and
investments in the First American Prime Obligations Fund, effective March
7, 1995. Effective after October 31, 1994, the Plan was amended so that
no additional contributions or investment fund transfers could be made to
the Network Systems Stock Fund.
Effective September 30, 1997, the Network Systems Stock Fund will be
eliminated from the Plan as an investment option. All amounts invested in
the Network Systems Stock Fund on September 30, 1997 will be sold and
reinvested in the other investment options as directed by the Company.
. Contributions to the Blended Rate Fund are invested in a pooled fund with
a single blended interest rate. The single blended interest rate is
determined quarterly based on the combined earnings of the underlying
investments. The underlying investments consist primarily of insurance
investment contracts that generally provide a fixed interest rate for a
period up to five years and investments in the First Stable Value Fund, a
First Trust collective fund. The investment objective of the First Stable
Value Fund is to provide stable income relative to current interest rates.
The Fund invests primarily in high-quality fixed interest rate contracts
issued by insurance companies and banks.
The Blended Rate Fund invests in insurance investment contracts that
provide a fixed rate of return at the rates and for the time periods
indicated below:
Applicable Fixed Interest Rate
Year of For Years Ended December 31,
Contributions 1990 1991 1992 1993 1994 1995
------------- ---- ---- ---- ---- ---- -----
1990 8.45 8.45 8.45 8.45 8.45 8.45
Contributions and earnings from the 1990 fixed rate insurance contract were
transferred effective January 3, 1995, to the other investment funds in
accordance with participants' investment allocation directions.
. The Fidelity Fund is a no-load fund managed by Fidelity Management Trust
Company. The Fidelity Fund seeks long-term capital growth by investing
primarily in common stock and securities convertible into common stock.
The Fidelity Fund may invest some of its assets in debt securities. The
percentage of assets invested in any one type of debt or equity security
may vary.
. The IAI Regional Fund is a no-load fund managed by Investment Advisors,
Inc. The investment objective of the IAI Regional Fund is capital
appreciation with at least 80% of its
-7-
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<PAGE>
. equity investments in companies headquartered in Minnesota, Illinois,
Wisconsin, Iowa, Nebraska, Montana, North Dakota, and South Dakota. The
IAI Regional Fund may invest a portion of its assets in short-term cash
equivalents on a temporary basis.
Investment Fund Transfers
- -------------------------
Effective September, 1996, participants may direct the Plan Administrator to
transfer all or a portion of their current account balances from one
investment fund to other investment funds in five percent increments on a
quarterly basis. Prior to September, 1996, such transfers could be made
twice a year.
Loans to Participants
- ---------------------
Participants may borrow from their pretax savings contribution accounts.
Loans may not be less than $1,000 or greater than $50,000. In addition,
loans may not exceed one-half of the participant's pretax savings
contribution account as of the most recent quarter-end valuation.
Participants are required to execute a promissory note and security agreement
giving the Plan a valid first lien against one-half of the participant's
title to their pretax savings contribution account. Promissory notes provide
for a repayment of principal and interest in equal pay period installments
over a period up to five years. Interest is based on the local bank prime or
reference rate and is fixed for the duration of the loan.
The portion of a participant's account that is invested in the Network
Systems Stock Fund is not available for withdrawal or loan during the
employment of the participant. The restrictions do not apply to
distributions by the Network Systems Stock Fund on termination of employment.
Loans made to participants are treated as a separate, segregated investment
of the participant. Accordingly, at the time the loan transaction is
consummated, the participant's allocated share of pretax savings contribution
account is reduced on a pro rata basis by the principal amount of the loan.
Repayments of principal and payments of interest are credited to the
investment funds in which the participant's pretax savings contribution
account is invested in the same proportions specified by the participant in
his most recently filed investment direction.
Withdrawal by Participants
- --------------------------
Distribution may be made upon the occurrence of any of the following:
1. Termination of employment at or after attainment of age 65;
2. Termination of employment prior to attainment of age 65 when
occasioned by permanent or total disability;
3. Death;
4. Financial Hardship (as defined); or
5. Any other termination of employment.
Vesting and Forfeitures
- -----------------------
Upon termination of employment, except for retirement, disability or death,
the participant's account and any related vested Company contributions become
payable to the participant.
-8-
<PAGE>
<PAGE>
Pursuant to the terms of the Plan, all participants became fully vested in
the balance of Company contributions when the Plan was effectively terminated
(i.e. December 31, 1995). Therefore, there were no forfeitures of nonvested
accounts during 1996. During 1995, forfeitures with respect to the Company's
contributions for prior years were allocated to the accounts of remaining
participants in an amount totaling $22,482.
In 1996, the Company determined that certain participants who had requested
to withdraw from the Plan at the end of 1995 and received distribution
payments during 1996, were owed additional amounts with respect to vested
Company contributions. Such amounts, aggregating $19,386, were distributed
to the applicable former participants in 1997 and are reflected within the
reconciliation of the financial statements to the Form 5500 in Note 5.
Administrative Costs
- --------------------
Administrative expenses are paid by the Company.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------
Method of Accounting
- --------------------
The 1996 and 1995 Plan financial statements are prepared on a liquidation
basis of accounting, as the Board of Directors has approved the termination
of the Plan. On a liquidation basis, net assets available for benefits are
reflected at their liquidation value. Employees' contributions are recorded
when received by the Company, and employer contributions are recorded when
authorized by the Company. Investment income is recorded when earned.
Expenses are recorded when obligations are incurred.
Cash equivalents are short-term, highly liquid investments that are both
readily convertible to cash and have maturities of three months or less at
the time of acquisition.
Investment Valuation
- --------------------
Investments in common stock of StorageTek are valued at the closing sales
price on the last business day of the year based on the NYSE composite
closing quotation. In connection with the merger with StorageTek, NSC
redeemed from its stockholders all of the rights outstanding under its
Amended and Restated Rights Agreement at a redemption price of $0.05 per
right.
Investments in the First American Prime Obligations Fund (formerly the First
American Institutional Money Fund) are valued at the net asset value on the
last business day of the year based on quotations obtained from national
securities exchanges.
Investments in the Blended Rate Fund are valued as of the last business day
of the year at cost plus reinvested interest for group annuity contracts with
insurance companies and at net asset value for investments in the First
Stable Value Fund.
Investments in the Fidelity Fund and the IAI Regional Fund are valued at the
net asset value of the applicable fund on the last business day of the year.
Investments in the Loan Fund are valued at the amount of the participant loan
net of principal repayments.
Investments in the participant's account are valued upon withdrawal as of the
end of the quarter which next follows by at least 30 days the date on which
the Administrator receives a withdrawal application from the participant.
Investments in the participant's account are valued upon distribution as of
the end of the quarter which coincides with or last precedes that date of
distribution.
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<PAGE>
Loans to participants and investment values as reported in the financial
statements approximate liquidation value.
Investment Transactions
- -----------------------
Purchases and sales of securities are reflected on a trade date basis (the
date the order to buy or sell is executed).
-10-
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NOTE 3 - INVESTMENTS
- --------------------
The following tables present the fair values of investments:
<TABLE>
<CAPTION>
Balance (Shares or
Face Amount) Held at Value at December 31,
Name of Issuers and Title of Issuers December 31, 1996 Cost 1996
- ------------------------------------------------- --------------------- ----------- ----------------------
<S> <C> <C> <C>
FIRST TRUST
- -----------
Storage Technology Corporation common stock 20,670 shares $ 803,288 $ 989,576
First American Prime Obligations Fund 10,233 10,233 10,233
---------- ----------
Total Network Systems Stock Fund 813,521 999,809
---------- ----------
Metropolitan Life Insurance Company Group Annuity
Contract (Maturity 12/31/97, Interest 6.66%) 1,422,355 1,422,355 1,422,355
Protective Life Insurance Company Group Annuity
Contract (Maturity 6/30/97, Interest 6.7%) 1,297,271 1,297,271 1,297,271
First Stable Value Fund, a First Trust Collective
Fund 310,372 shares 4,997,697 5,616,311
First American Prime Obligations Fund 897,200 897,200 897,200
---------- ----------
Total Blended Rate Fund 8,614,523 9,233,137
---------- ----------
---------- ----------
Fidelity Fund 562,018 shares 11,683,433 13,881,841
---------- ----------
---------- ----------
IAI Regional Fund 205,982 shares 4,598,942 4,776,727
---------- ----------
Investments in loans to employee participants 714,012 714,012 714,012
First American Prime Obligations Fund 24,539 24,539 24,539
---------- ----------
Total loan fund 738,551 738,551
---------- ----------
Total investments $26,448,970 $29,630,065
========== ==========
</TABLE>
-11-
<PAGE>
<PAGE>
NOTE 3 - INVESTMENTS (CONT.)
- ----------------------------
<TABLE>
<CAPTION>
Balance (Shares or
Face Amount) Held at Value at December 31,
Name of Issuers and Title of Issuers December 31, 1995 Cost 1995
- ------------------------------------------------- --------------------- ----------- ----------------------
<S> <C> <C> <C>
FIRST TRUST
- -----------
Storage Technology Corporation common stock 31,161 shares $ 1,217,959 $ 743,969
First American Prime Obligations Fund 20,470 20,470 20,470
---------- ----------
Total Network Systems Stock Fund 1,238,429 764,439
---------- ----------
Sun Life Insurance Company of American Group Annuity
Contract (Maturity 12/31/95, Interest 8.8%) 3,800,663 3,800,663 3,800,663
John Hancock Mutual Life Insurance Company Group
Annuity Contract (Maturity 12/31/96, Interest 6.92%) 886,825 886,825 886,825
Metropolitan Life Insurance Company Group Annuity
Contract (Maturity 12/31/97, Interest 6.66%) 1,478,911 1,478,911 1,478,911
Protective Life Insurance Company Group Annuity
Contract (Maturity 6/30/97, Interest 6.7%) 1,348,231 1,348,231 1,348,231
First Stable Value Fund, a First Trust Collective Fund 348,501 shares 5,610,855 5,957,084
First American Prime Obligations Fund 1,081,797 1,081,797 1,081,797
---------- ----------
Total Blended Rate Fund 14,207,282 14,553,511
---------- ----------
Fidelity Fund 450,936 shares 8,839,748 10,195,655
First American Prime Obligations Fund 141,674 141,674 141,674
---------- ----------
Total Fidelity Fund 8,981,422 10,337,329
---------- ----------
---------- ----------
IAI Regional Fund 166,308 shares 3,593,371 3,938,171
---------- ----------
Investments in loans to employee participants 742,511 742,511
First American Prime Obligations Fund 58,117 58,117 58,117
---------- ----------
Total loan fund 800,628 800,628
---------- ----------
Total investments $28,821,132 $30,394,078
========== ==========
</TABLE>
NOTE 4 - TAX STATUS
- -------------------
The Plan has received a determination letter from the Internal Revenue
Service dated July 19, 1995 stating that the Plan is qualified under section
401(a) of the Internal Revenue Code of 1986 (the Code) and, therefore, is
exempt from taxation. Once qualified, the Plan is required to operate in
conformity with the Code of ERISA to maintain its tax-exempt status. The
administrator is not aware of any course of action or series of events that
have occurred that might adversely affect the Plan's qualified status.
The Plan has filed Form 5310, Application for Determination for Terminating
Plan, dated April 22, 1997 with the Internal Revenue Service. As of the date
of these financial statements, a determination has not been received from the
Internal Revenue Service.
-12-
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<PAGE>
NOTE 5 - RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500
- ------------------------------------------------------------
The following is a reconciliation of net assets available for benefits per
the financial statements to the Form 5500:
December 31,
-------------------------
1996 1995
-------------------------
Net assets available for benefits per the
financial statements $29,645,423 $31,219,025
Amounts allocated to withdrawing
participants (644,393) (1,755,852)
---------- ----------
Net assets available for benefits per the
Form 5500 $29,001,030 $29,463,173
========== ==========
Amounts allocated to withdrawing participants by fund option is as follows:
December 31,
---------------------------
1996 1995
---------------------------
Network Systems Stock Fund $ 58,384 $ 24,818
Blended Rate (Guaranteed Interest) Fund 211,007 932,612
Fidelity Fund 229,693 702,906
IAI Regional Fund 138,245 67,267
Loan Fund 7,064 28,249
----------- ----------
$ 644,393 $ 1,755,852
=========== ==========
The following is a reconciliation of benefits paid to participants per the
financial statements to the Form 5500:
Year Ended December 31,
--------------------------
1996 1995
--------------------------
Benefits paid to participants per the
financial statements $ 5,833,687 $ 5,858,511
Add: Amounts allocated to withdrawing
participants in current year 644,393 1,755,852
Less: Amounts allocated to withdrawing
participants in prior years (1,755,852) (844,832)
---------- ----------
Benefits paid to participants per the Form
5500 $ 4,722,228 $ 6,769,531
========== ==========
Amounts allocated to withdrawing participants are recorded on the Form 5500
for benefit claims that have been processed and approved for payment prior to
year-end but not yet paid.
-13-
<PAGE>
<PAGE>
SCHEDULE I
- ----------
NETWORK SYSTEMS CORPORATION
SAVINGS AND STOCK OWNERSHIP PLAN
ITEM 27a FORM 5500 - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 1996
<TABLE>
<CAPTION>
Balance (Shares or
Face Amount) Held at Value at December 31,
Name of Issuers and Title of Issuers December 31, 1996 Cost 1996
- ------------------------------------------------- -------------------- ---- ---------------------
<S> <C> <C> <C>
FIRST TRUST
- -----------
Storage Technology Corporation common stock* 20,670 shares $ 803,288 $ 989,576
First American Prime Obligations Fund** 10,233 10,233 10,233
---------- ----------
Total Network Systems Stock Fund 813,521 999,809
---------- ----------
Metropolitan Life Insurance Company Group Annuity
Contract (Maturity 12/31/97, Interest 6.66%) 1,422,356 1,422,355 1,422,355
Protective Life Insurance Company Group Annuity
Contract (Maturity 6/30/97, Interest 6.7%) 1,297,271 1,297,271 1,297,271
First Stable Value Fund, a First Trust collective
fund** 310,372 shares 4,997,697 5,616,311
First American Prime Obligations Fund** 897,200 897,200 897,200
---------- ----------
Total Blended Rate Fund 8,614,523 9,233,137
---------- ----------
---------- ----------
Fidelity Fund 562,018 shares 11,683,433 13,881,841
---------- ----------
---------- ----------
IAI Regional Fund 205,982 shares 4,598,942 4,776,727
---------- ----------
Investments in loans to employee participants
(Interest rates ranging from 6.75% to 9%) 714,012 714,012 714,012
First American Prime Obligations Fund 24,539 24,539 24,539
---------- ----------
Total loan fund 738,551 738,551
---------- ----------
Total investments $26,448,970 $29,630,065
========== ==========
</TABLE>
- -----------------------------------------------------------------
* Party-in-interest
** Party-in-interest, because an affiliate is trustee of the Plan
-14-
<PAGE>
<PAGE>
SCHEDULE II
----------
Page 1 of 2
NETWORK SYSTEMS CORPORATION
SAVINGS AND STOCK OWNERSHIP PLAN
ITEM 27b FORM 5500 - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS IN DEFAULT
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Amount Received
Original During Reporting Year Unpaid
Party in Identity and Address Amount ---------------------- Balance at
Interest of Obligor of Loan Principal Interest End of Year
- ----------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C>
No Marc S. Daeschner $ 6,468.40 $ 1,442.22 $ 326.94 $ 4,715.69
3211 Hunters Glen Dr.
Missouri City, TX 77459
No Carlito S. Deaquino 3,000.00 511.22 161.98 1,994.84
210 Karen Avenue
Romeoville, IL 60446
No Kathy R. Gilleland 3,700.00 546.10 237.32 2,827.39
10761 Smetana Rd., Apt. 121
Minnetonka, MN 55343
No Raymond Graphenteen 4,400.00 689.60 154.39 2,467.60
4010 Zane Avenue North
Robbinsdale, MN 55422
No Andrew P. Gray 1,917.49 196.51 22.73 1,527.17
7937 Clark Springs Drive
Plano, TX 75025
No Reginald D. Grier 6,400.00 1041.30 107.10 1,769.26
8717 S. 69th East Ave.
Tulsa, OK 74133
No Jody L. Lis 2,939.63 496.35 224.40 2,330.40
14375 Partridge NW
Andover, MN 55305
</TABLE>
<TABLE>
<CAPTION>
Detailed Description of Loan (1)
------------------------------------------- Amount Overdue
Identity and Address Origination Interest Maturity ----------------------
of 0bligor Date Rate Date Principal Interest
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Marc S. Daeschner September 1995 6.75% May 1999 $ 307.68 $ --
Carlito S. Deaquino December 1994 7.75% November 1999 84.15 --
Kathy R. Gilleland June 1995 9.00% May 2000 178.05 --
Raymond Graphenteen June 1994 6.75% May 1999 241.14 --
Andrew P. Gray September 1995 6.00% November 1997 730.80 --
Reginald D. Grier January 1993 6.00% November 1997 401.94 --
Jody L. Lis September 1995 9.00% July 2000` 57.66 --
</TABLE>
-15-
<PAGE>
<PAGE>
SCHEDULE II
----------
Page 2 of 2
<TABLE>
<CAPTION>
Amount Received
Original During Reporting Year Unpaid
Party in Identity and Address Amount ---------------------- Balance at
Interest of Obligor of Loan Principal Interest End of Year
- ----------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C>
No Saturnina Mayo 767.82 0 0 767.82
No Joeseph O'Donnell 3,228.31 0 0 1,288.97
36859-A Neward Blvd.
Newark, CA 19061
No Lisa M. O'Halloran 2,300.00 369.58 97.92 1,401.97
12200 Marion Lane W #5308
Minnetonka, MN 55305
No Lisa Olsen 7,000.00 776.27 263.23 5,822.91
2337 Lake Elmo Ave. N
Lake Elmo, MN 55042
No Jolene K. Ross-Bergh 1,416.02 71.34 12.02 1,256.42
256 Washington Ave. N
Minneapolis, MN 55405
No Robert A. Taylor 18,101.12 3,047.46 1,324.14 14,330.47
1311 Denise
Planfield, IL 60544
No Harold G. Varnis 751.32 0 0 705.50
13867 85th Place N
Maple Grove, MN 55369
No David A. Woods 1,687.25 1,244.73 52.39 117.39
22861 W. Martin Lake Dr.
Stacy, MN 55079
</TABLE>
<TABLE>
<CAPTION>
Detailed Description of Loan (1)
------------------------------------------- Amount Overdue
Identity and Address Origination Interest Maturity ----------------------
of 0bligor Date Rate Date Principal Interest
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Saturnina Mayo July 1993 6.50% July 1994 767.82 --
Joeseph O'Donnell January 1992 10.00% October 1995 1,288.97 --
Lisa M. O'Halloran September 1994 7.25% August 1999 106.25 --
Lisa Olsen June 1994 6.75% May 1999 2,702.70 --
Jolene K. Ross-Bergh September 1995 6.00% July 1998 500.16 --
Robert A. Taylor September 1995 9.00% June 2000 546.45 --
Harold G. Varnis September 1995 8.50% May 1996 705.50 --
David A. Woods September 1995 8.00% October 1996 117.39 --
</TABLE>
- ---------------------------------------------------------------------------
(1) Loans consist of Promissory Notes with Plan participants using their
vested account balances under the Plan as collateral. Loan defaults result
primarily from employees terminated or placed on non-active status during
1996. A termination distribution will be made in 1997 to repay all
outstanding loan balances in default at December 31, 1996.
-16-
<PAGE>
<PAGE>
SCHEDULE III
-----------
NETWORK SYSTEMS CORPORATION
SAVINGS AND STOCK OWNERSHIP PLAN
ITEM 27d FORM 5500 - SCHEDULE OF REPORTABLE TRANSACTIONS*
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Identity of Purchase Selling
Party Involved Description of Assets Price Price
- -------------------------------------------------------------------------------------------------------------------------
SECURITIES PURCHASED AND SOLD IN EXCESS OF 5% OF PRIOR PERIOD'S ENDING ASSET MARKET VALUE
- -----------------------------------------------------------------------------------------
<C> <S> <C> <C>
First Trust National First American Prime Obligations Fund;
Association** Purchased 13,622,580 units in 274 transactions $13,662,580
Sold 13,992,668 units in 118 transactions $13,992,668
First Trust National Fidelity Fund Inc. Com.;
Association Purchased 189,800 shares in 21 transactions 4,431,771
Sold 84,984 shares in 14 transactions 2,021,212
First Trust National IAI Regional Fund Inc. Com.;
Association Purchased 68,933 shares in 18 transactions 1,648,788
Sold 29,259 shares in 12 transactions 717,727
SINGLE SECURITY TRANSACTIONS IN EXCESS OF 5% OF PRIOR PERIOD'S ENDING ASSET MARKET VALUE
- ----------------------------------------------------------------------------------------
First Trust National First American Prime Obligations Fund;
Association** Purchased 3,885,415 units in 1 transaction 3,885,415
First Trust National Sun Life Insurance Co. of America, GIC 1991;
Association Sold 3,800,663 units in 1 transaction 3,800,663
</TABLE>
<TABLE>
<CAPTION>
Current Value
of Asset on Net
Cost of Transaction Gain
Description of Assets Asset Date (Loss)
- -----------------------------------------------------------------------------------------------------
SECURITIES PURCHASED AND SOLD IN EXCESS OF 5% OF PRIOR PERIOD'S ENDING ASSET MARKET VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
First American Prime Obligations Fund;
Purchased 13,622,580 units in 274 transactions $13,662,580
Sold 13,992,668 units in 118 transactions $13,992,668 13,992,668 --
Fidelity Fund Inc. Com.;
Purchased 189,800 shares in 21 transactions 4,431,771
Sold 84,984 shares in 14 transactions 1,729,760 2,021,212 $291,452
IAI Regional Fund Inc. Com.;
Purchased 68,933 shares in 18 transactions 1,648,788
Sold 29,259 shares in 12 transactions 643,217 717,727 74,510
SINGLE SECURITY TRANSACTIONS IN EXCESS OF 5% OF PRIOR PERIOD'S ENDING ASSET MARKET VALUE
- ----------------------------------------------------------------------------------------
First American Prime Obligations Fund;
Purchased 3,885,415 units in 1 transaction 3,885,415
Sun Life Insurance Co. of America, GIC 1991;
Sold 3,800,663 units in 1 transaction 3,800,663 3,800,663 --
</TABLE>
- -----------------------------------------------------------------------------
* Transactions or series of transactions in excess of 5 percent of the
current market value of the Plan's assets as of December 31, 1995 as defined
in Section 2520-103.6 of the Department of Labor Rules and Regulations for
Reporting and Disclosure under ERISA.
** Party-in-interest, because an affiliate is trustee of the Plan
-17-
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the Plan) have duly caused the annual
report to be signed on its behalf by the undersigned thereunto duly authorized.
NETWORK SYSTEMS CORPORATION
SAVINGS AND STOCK OWNERSHIP PLAN
BY: STORAGE TECHNOLOGY CORPORATION
(Administrator of the Plan)
06/27/97 /s/ DAVID E. LACEY
---------- -------------------------------
(Date) David E. Lacey
Executive Vice President
and Chief Financial Officer
(Principal Financial Officer)
